Executive Summary / Key Takeaways

• Elevation Oncology has strategically pivoted its focus to EO-1022, a potentially differentiated HER3 antibody-drug conjugate (ADC), following the discontinuation of its prior lead candidate, EO-3021, due to clinical trial data not meeting success criteria.
• The company is leveraging site-specific conjugation technology for EO-1022, with preclinical data suggesting potential advantages in stability and safety profile compared to benchmark ADCs. An Investigational New Drug (IND) application for EO-1022 is planned for 2026.
• In response to the EO-3021 outcome and to maximize shareholder value, Elevation Oncology has initiated a process to evaluate strategic options, including potential mergers, sales, or licensing arrangements.
• As of March 31, 2025, the company held $80.7 million in cash, cash equivalents, and marketable securities, which is expected to fund operations into the second half of 2026, but significant future funding will be required to advance EO-1022 through clinical development.
• The company faces intense competition in the oncology ADC space and is subject to risks inherent in early-stage biotech, including clinical trial success, regulatory approval, manufacturing reliance, and the uncertain outcome of the strategic review process.

Setting the Stage: A Biotech's Strategic Evolution

Elevation Oncology, Inc., founded in 2019, embarked on a mission to develop selective cancer therapies for patients with significant unmet medical needs, primarily leveraging its expertise in antibody-drug conjugates (ADCs). The company's journey began with the acquisition of assets related to seribantumab, an anti-HER3 monoclonal antibody, which now forms the foundation of its lead program, EO-1022. Operating within the highly competitive biotechnology and pharmaceutical industries, Elevation Oncology has strategically positioned itself to target genomically defined patient populations, aiming to offer more precise and potentially more effective treatment options.

The company's strategy centers on identifying promising targets and applying advanced ADC technology to create differentiated product candidates. This approach is critical in an oncology landscape dominated by large pharmaceutical players with extensive resources and broad portfolios, such as Merck & Co. (MRK), Pfizer Inc. (PFE), AstraZeneca PLC (AZN), and Amgen Inc. (AMGN). While these giants command significant market share with established therapies like immunotherapies and targeted small molecules, Elevation Oncology seeks to carve out valuable niches by focusing on specific molecular alterations and developing ADCs designed for improved efficacy and safety profiles.

Elevation Oncology's core technological differentiator lies in its approach to ADC construction, particularly for EO-1022. This candidate utilizes seribantumab conjugated via site-specific glycan technology to a monomethyl auristatin E (MMAE) payload, resulting in a drug-to-antibody ratio (DAR) of 4. This site-specific conjugation is intended to produce a more homogeneous ADC product compared to traditional, stochastic conjugation methods used in some benchmark ADCs like patritumab-DXd. Preclinical data presented in April 2025 highlighted tangible benefits of this approach, showing EO-1022 to be highly stable in human serum with minimal free payload. This characteristic is significant because high levels of free payload can contribute to off-target toxicity, potentially limiting the therapeutic window. The preclinical studies also demonstrated potent in vitro cytotoxicity dependent on HER3 expression levels and anti-tumor activity in vivo across models with low, medium, and high HER3 expression, including a patient-derived xenograft model of low HER3-expressing EGFR-mutant lung cancer.

The "so what" for investors is that this technological differentiation, if validated in clinical trials, could translate into a potentially improved safety profile and broader applicability across different HER3 expression levels compared to competing ADCs. This could provide a competitive edge in a crowded market, potentially leading to better clinical outcomes and a more favorable commercial profile. However, translating promising preclinical data into clinical success is a significant hurdle, and larger competitors possess vastly greater resources for clinical development, manufacturing scale-up, and commercialization. While Elevation Oncology's technology offers a potential advantage in specificity and safety, larger companies often benefit from cost leadership through scale and established distribution networks, which could pose challenges for Elevation Oncology in terms of pricing and market penetration if EO-1022 reaches commercialization.

The Strategic Pivot: Learning from EO-3021 and Focusing on EO-1022

Elevation Oncology's strategic path took a significant turn in March 2025 with the announcement of the discontinuation of its EO-3021 program, a Claudin 18.2 ADC. This decision stemmed from data from the dose escalation and expansion stages of the Phase 1 trial, where treatment with EO-3021 as a monotherapy in a biomarker-enriched population of patients with gastric or gastroesophageal junction cancer demonstrated an objective response rate (ORR) of 22.2% and a disease control rate (DCR) of 72.2%. While the treatment was generally well-tolerated with minimal hematological and liver toxicity, the results did not meet the company's "bar for success."

The discontinuation of EO-3021 underscores the inherent risks in drug development, where promising preclinical or early clinical data do not guarantee success in later stages. This outcome necessitated a strategic re-evaluation and operational adjustments. As part of a restructuring, the company implemented a workforce reduction of approximately 70%, incurring restructuring charges of $3.4 million in the first quarter of 2025, including $2.2 million in termination benefits and $1.2 million in asset write-offs. This reduction was substantially completed in March 2025.

Following this pivot, Elevation Oncology is now primarily focused on advancing EO-1022. The company is actively pursuing preclinical and IND-enabling activities for this HER3 ADC, with research and development expenses for these activities increasing by $1.3 million in the first quarter of 2025 compared to the same period in 2024.

The company's outlook includes filing an IND application for EO-1022 in 2026, marking the next critical step towards clinical evaluation. The preclinical data supporting EO-1022, particularly its differentiated conjugation technology and activity across varying HER3 expression levels, form the core of the updated investment thesis. The Synaffix license, secured in September 2024, provides global access to the site-specific ADC technology platform underpinning EO-1022's design, although it comes with potential future milestone payments of up to $365.5 million and tiered royalties.

Financial Standing and the Path Forward

Elevation Oncology's financial position reflects its status as a clinical-stage biotech with no product revenue. For the three months ended March 31, 2025, the company reported a net loss of $14.2 million, an increase from the $10.7 million net loss for the same period in 2024. Total operating expenses rose to $14.2 million in Q1 2025 from $9.9 million in Q1 2024, primarily driven by the $3.4 million in restructuring charges and increased R&D spending on EO-1022 preclinical activities, partially offset by decreased R&D on the discontinued seribantumab clinical program. General and administrative expenses saw a modest increase.

As of March 31, 2025, the company held $80.7 million in cash, cash equivalents, and marketable securities, a decrease from $93.2 million at December 31, 2024. Net cash used in operating activities was $12.7 million in Q1 2025, reflecting the ongoing R&D and G&A expenses. Investing activities provided $23.8 million, mainly from the sale and maturity of marketable securities. Financing activities used less than $0.1 million in Q1 2025, a significant change from the $30.3 million provided in Q1 2024, which included proceeds from prior ATM offerings and warrant exercises.

The company estimates that its current cash position provides a runway into the second half of 2026. However, advancing EO-1022 through clinical development will require substantial additional funding. The timing and amount of future capital requirements are uncertain and depend heavily on the progress and success of preclinical studies and clinical trials, regulatory outcomes, manufacturing costs, and potential commercialization expenses. The company has an active ATM facility allowing for the sale of up to $75.0 million in common stock, though no sales had occurred under this facility as of March 31, 2025. Raising additional capital through equity or debt financings, or collaborations, may result in dilution or unfavorable terms.

In a significant subsequent event not fully reflected in the March 31, 2025 financials but disclosed in the 10-Q filing on May 15, 2025, the company voluntarily prepaid its outstanding Term Loan of $32.3 million in May 2025. This prepayment included the aggregate principal amount, a prepayment fee of $0.3 million, a final payment of $1.94 million, accrued interest, and lender expenses, fully discharging the debt obligations and releasing associated security interests.

While this eliminates debt service obligations, it also reduces the company's cash balance.

Against this financial backdrop and following the discontinuation of EO-3021, Elevation Oncology has initiated a process to evaluate strategic options to maximize shareholder value. This process could lead to various outcomes, including a merger, sale, divestiture of assets, or licensing agreements. The outcome of this strategic review is a critical factor for investors, as it will significantly shape the company's future direction and potential value realization.

Competition in the oncology ADC space is fierce, with numerous companies developing HER3-targeting ADCs, including those from major players like Daiichi Sankyo (DSNKY)/Merck & Co. and SystImmune/Bristol Myers Squibb (BMY), as well as other modalities like bispecific antibodies (e.g., Merus' (MRUS) zenocutuzumab). Many of these competitors possess significantly greater financial, technical, and human resources. Elevation Oncology's ability to compete will depend on the clinical differentiation of EO-1022, its ability to secure necessary funding, and the outcome of its strategic review.

Conclusion

Elevation Oncology is at a pivotal juncture, having shifted its focus to the potentially differentiated HER3 ADC, EO-1022, following the discontinuation of its prior lead program. The company's technological approach to ADC design offers potential advantages that could translate into improved safety and efficacy, but this remains to be validated in clinical trials. With a cash runway extending into the second half of 2026, the company has initiated a strategic review process aimed at maximizing shareholder value in the face of significant future funding requirements and intense competition. Investors in Elevation Oncology are betting on the potential of the EO-1022 program and the outcome of the strategic evaluation process, which will determine the company's path forward and the potential for value creation. The success of EO-1022's preclinical-to-clinical translation and the terms of any strategic transaction are the most critical factors to monitor.